Market Profile
Note that not all distributions are perfectly distributed in the real markets.
Nevertheless, prices are assumed to form a fairly symmetrical and balanced bell‐
shaped distribution over time. Therefore any skew to the lower or upper ends in
the distribution is expected to gradually re‐balance toward a more symmetrical
profile as time passes. Prices are expected to eventually revert to the mean or aver-
age value of the distribution, which represents the fairest price.the value area
This bell‐shaped distribution of price activity occurs frequently and naturally in
the markets as price searches for value. It is therefore not surprising and rather
useful that it may be assumed to approximate a normal distribution, where its
properties are very well known. As such, 68 percent of all activity is expected to
lie within one standard deviation of the mean price of the distribution. This area
of balance between price and value is called the value area. It represents the area
where there is the greatest agreement between price and value. The further price
is away from the mean, the greater the disagreement between price and value,
that is, becoming more overvalued or undervalued with respect to the market.
As prices continue to revert to fair price, such activity helps to balance the profile
toward a more symmetrical distribution of prices. See Figure 17.6.Calculating the value area via the tpO Count
In Market Profile, each half hour period is assigned or designated a letter and is
called the Time Price Opportunity (TPO). It represents the time or period over
which the market looks for an opportunity in price. The part of the distribution
that lies closest to the middle of the distribution’s range and contains the most
letters, or TPOs, is called the Point of Control (POC). Should there be two equalfigure 17.6 Representing Price Activity as a Bell‐Shaped Distribution.